An Interview With Pedro Martín

Pedro Martín, the founder and owner of Tropical Tobacco.

(continued from page 2)

CA: Did the owners of Ashton pull their brand from Tabadom when Davidoff came in? Or had they left before that?
Martín: Before. They had had problems with Kelner. We [Tabadom] had a big fight with the Ashton people. But I was a minority stockholder and I couldn't do anything for [Ashton owner] Robbie Levin, and he knows that.

CA: How many cigars were you making in the Dominican Republic at Tabadom, and how many were you importing in total to the United States?
Martín: I used to buy about a million and a half cigars out of their production of 2 million, and I was importing about 2 million or so because I used to buy from Honduras and the Canary Islands, too.

CA: In 1989 you were aware the cigars that you were getting from Tabadom had begun to deteriorate in quality. What did you do and where did you go?
Martín: In the beginning I didn't do anything much. I just started making brands in Honduras because I had confidence in the people there. I could work with the people there better than at Tabadom. I started making V Centennial in Honduras and Don Juan in Nicaragua.

CA: Both of those brands were released prior to 1992, right?
Martín: Don Juan in 1988 and V Centennial came out in 1992.

CA: Was Don Juan a direct response to what happened at Tabadom? Did you decide to go to Nicaragua and start making the cigar there?
Martín: Yes. And, the same thing was true about V Centennial. I had gotten the idea for V Centennial in 1988.

CA: Who made Don Juan in Nicaragua at that point?
Martín: It was made by Nestor Plasencia in Ocotal. And V Centennial was made in Honduras by Plasencia also. I was there and had control of the tobacco. He didn't have the tobacco. I bought the tobacco and put it into the factory, and they used my blend in my cigar. I had a lot of control in the beginning.

CA: Many manufacturers started out with one or two brands. But you created five. What was your thinking, what strategy did you have? Why did you create five brands instead of just one or two?
Martín: The United States was a different cigar market than today. At that time, I figured out that if I had more brands, I had more chance to enter the market, to get on the shelves at retailers. The cigars came in different price levels, but mostly middle or lower price.

CA: But V Centennial was a premium-priced cigar.
Martín: From the beginning. When I created V Centennial in 1992, I was thinking of selling maybe 100,000 cigars. And the first year I sold 250,000. And in the second year I sold over a half a million, so that was a brand that exceeded my expectations.

CA: If you sold half a million in 1993, how many did you sell in 1994?
Martín: In 1994 and 1995 I could not sell that many more because I did not make that many more. I could have sold millions in 1995 and 1996.

CA: How many are you making and selling today?
Martín: In 1997, we sold over a million Don Juan and more than 600,000 V Centennial. In 1998 I have not made the figure yet, but I know it's going to go down about 40 percent. Not because of the quality but because of the market.

CA: Do you see 1998 going back to a sales level of 1994 or 1995?
Martín: I would say about 1994, yes.

CA: Will you still sell about 2 million cigars total?
Martín: Yes. We are still selling a bit more than 2 million. But last year, we sold over 5 million.

CA: Do you think the premium market will come up again after the glut is over?
Martín: I am now making the best cigars in my life since I made them in Cuba. The production demands are less now and I have more time. I have the same filler but I'm aging it for a longer time. I've got the same blend but with all good rollers. I am making a hell of a good cigar now. It is a shame that I am not selling that many, but I am making a good cigar, no question about it.

CA: Let's go over the production of each of your brands. Let's start with Solo Aromas. How much do you sell on an annual basis?
Martín: I have not sold Solo Aromas for about a year. Solo Aromas was made in Honduras. Nestor Plasencia refused to make the Solo Aromas for me because it was a bundle brand and there was no margin on it. He wanted to make more money. He listed the price in such a way that I couldn't afford any longer to make the cigar, so I took it out of the market. I started making Solo Aromas again about two months ago in the Dominican Republic at our factory [which opened in early 1997].

CA: And the Maya?
Martín: I am still making Mayas in Honduras. In 1998, we made about 200,000; 1997 was half a million.

CA: Cacique?
Martín: In 1997 was over 500,000, in 1998, I would say about 300,000.

CA: Lempira?
Martín: Lempira is down quite a bit. I was smoking a Lempira the other day to find out why that is, why we are not selling it. A couple hundred thousand at most.

CA: And Don Juan in 1997?
Martín: Don Juan is still the number one. I don't know how many--1.2 million in 1997, more or less.

CA: And in 1998?
Martín: Maybe half that.

CA: You've instituted another change. You started a factory in the Dominican Republic in 1997.
Martín: Yes. In February 1997, we started to teach people to make cigars because we could not find enough good rollers. We had to teach the young fellows how to make cigars.

CA: So you started producing cigars in your own factory in May 1997. Wasn't it about that time that other factories began to close?
Martín: They closed a lot of factories between October 1997 and May 1998. Maybe a hundred factories closed down in the city of Tamboril alone. Most of them were just in houses, but they were cigar factories.

CA: How many rollers do you have working right now?
Martín: Around 40.

CA: How many could work in the factory?
Martín: I can get up to 300 or 400 if I want to. You can make 50,000 cigars a day over there, easy.

CA: And how many are you making right now?
Martín: We are making about 8,000 to 10,000 a day. Generally we are going to increase by another 4,000 a day because we have had a lot of business outside the United States. I think in 1997 we got up to about 30,000 per day, which was our peak.

CA: How many rollers were working at that time?
Martín: One hundred and sixty-five.

CA: And you make Don Juan and V Centennial there, is that right?
Martín: Don Juan Platinum to start, and we brought in V Centen-nial later.

CA: Where is the factory?
Martín: Santiago [Dominican Republic]. Right in the middle of the town. It is a big building. A beautiful building. It used to be a tobacco warehouse. Then they turned it into a clothing factory. It's two stories high, 70,000 square feet. If you count the office and all the other areas, there is more space, but that's the main part. It is computerized. It's one of the best buys in Santiago.

CA: Let's go back to 1992. You had just launched a new cigar brand and this magazine hit the street. What did you think at that point? You had been in cigars your entire life; did you expect what happened to happen?
Martín: As a matter of fact, I was disappointed with the business at that point. The business did not grow. I tried different tactics. I know I was making a good cigar and bingo--1993 and '94 were worse than the 1980s for me.

CA: You were making about 2 million cigars.
Martín: At that point, two and a half million. I did not increase my production until 1995 or 1996.

CA: Was that because you didn't think the boom would continue?
Martín: I was cautious at first but I thought it would last a little longer than it did.

CA: Why did you start your factory?
Martín: Because I couldn't get enough production out of anybody. I tried to work with Tabadom. We tried to get 3 million cigars a year and not to open my own factory. I wanted to work with the factories. But they all had too many commitments. Even people who came in as customers in the last couple of years, the factories were making more cigars for them than for me. And, they started charging more, too. That's when people like George Hamilton came around, and all these people started to pay enormous amounts of money for cigars. I don't know why they did it. I think there were two reasons that we started the factory: one was because of the demand, that you could not get enough cigars, but the other was quality. The quality was dropping tremendously, both in the Dominican Republic and Honduras.

CA: Didn't a lot of factories have quality control problems?
Martín: Yes. They were just not using good tobacco. They were putting out cigars that should never have left the factory.

CA: How do you feel about the business today?
Martín: I am a little optimistic. I think the business is going to be good again. It's not likely to be a boom again, but it's going to be a real good business again, no question about it. Absolutely sure about it.

CA: Do you have any prediction when that might happen?
Martín: Maybe in a few months, maybe a year, maybe more; I do not know. That is a million-dollar question.

CA: Do you see your international business as a way to get through the tough times here?
Martín: Yes. We are making more contacts outside of the United States. That's where our future is. We have started making Tropical into an international company.

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